Still Justifying FDI In Retail

The Prime Minister, Finance Minister, commerce & Industry Minister, other cabinet ministers and the Congress Party have been trying to justify the foreign direct investment in retail stores like Wal-Mart for more than 10 days. Even after one of the alliance partners has parted ways, the government is bent upon pushing it. Why is the government trying to justify and market aggressively FDI in multi brand retail is hard to swallow. Unless the idea is to serve less than 1% rich Indians, who would like to flaunt their wealth by indulging in excessive shopping only to make a status statement,there appears no immediate benefit from it. In the long run it shall prove disastrous. The fear of the black money getting entry into the country through the back door are not entirely unfounded.

Retail stores will keep on their shelves everything from a needle to an elephant as their reputation goes. Naturally, liquor trade will find an easy entry into India. The liquor lobby has been chasing it for decades, but it will be facilitated now only. IMFL(India Made Foreign Liquor) will be substituted by the real one. For the taste of it, it will serve not only the existing clients but add new customers, especially from the young generation. Business magnets in drug pushing and liquor barons know how to make a success of it. The government which is prohibited from serving liquor in official functions, will be persuaded to gladly lift these restrictions in the interests of more revenue. When Mahatma Gandhi has been ignored in abandoning prohibition under the greater influence of the liquor Czars and retail shops have been opened even in the close vicinity of educational institutions, will it be difficult to market choicest wines, beer or whisky? Since FDI in retail is being pushed in the name of the farmer, this segment will open vast new markets for multinational retail stores.

It is necessary to look for reasons as to why the government has failed to take the people into confidence and win their trust so far. One reason is that this government has been found to be high on rhetoric and low on implementation. Every time it has launched any programme in the name of the poor farmers, it has increased prices unreasonably. Prices have  followed laissez faire behaviour of their own- unchecked, uncontrolled, untamed. As the pretensions and practices of the government have not matched in the past, there can be no guarantee that they shall in future when the retail trade comes under the strong grip of the multi-national organized retail. The present supply chain, if broken once, will not be restored, creating a situation of shortages or price manipulations to the detriment of the consumers. Already some ugly practices of the industrialized societies have been adopted by unscrupulous traders whereby supplies are regulated only to maintain prices high even in a situation of plenty. In spite of strict laws governing such practices, called hoarding or black marketing in the political jargon, no demonstrative action is ever taken against the offenders. They enjoy political patronage. So shall the foreign multi brand stores. What effects on health they have, is never their concern- you can’t even file a complaint against them. They have been found to be arrogant, costly, exploitative and refuse to behave unless taught a few lessons in the consumer courts. But the proliferation of businesses that make innumerable consumers knock at the doors of courts on a daily basis is hardly the thing anybody would ever ask for. It doesn’t convince. When the average Indian lives on less than a US dollar a day, these stores don’t serve them. For the affluent ones, all the resources can not be placed at their disposal, otherwise the existing gap between the rich and the poor will only widen, for it has remained in the past more than 6 decades. Take any election manifesto of any political party, it has been assuring the poor only to ameliorate their condition, but have ended making it bad to worse. The disruption of the existing format of retail trade is bound to make it worst for the majority, though a small minority might find it exalting.

Who doesn’t want economic reforms? People have been demanding reforms to facilitate growth, employment and higher living standards. They have been agitating for reforms so that corruption could be rooted out. But the government, because of the corrupt elements becoming ministers, have compromised with corruption. It obeys the dictates of lobbies, even though the activity, programme or policy may be patently anti-people, as is the FDI in retail. One should never forget that India is not an industrialized country. It can not adopt the practices of those countries without making an informed choice whether it will be in the national interest to do so. India is primarily an agriculture based and oriented economy and shall remain so for a very long time. It can’t become urbanized overnight. Unless these developments take place, India can postpone foreign retail stores. There are several other options to attract foreign capital, if that is the goal.

For fast economic growth India needs world class roads and highways. Our roads are so poorly built that they hardly survive from monsoon to monsoon and develop pot holes aplenty in the intervening period. China makes roads that stay for 25 years. Should FDI be not encouraged first in roads &  highways, which have the potential to attract 20 times more foreign capital than retail trade can ever do? Our bridges, foot over bridges, underpasses etc also need superior engineering. These will outperform retail FDI. It needs to be noted that FDI in multi-brand retail shall gain entry only once and stay here forever, whereas the FDI in roads, highways, bridges etc will come and also go back soon. The economic gain here will be large and of better quality than these retail stores. We need not look for a success story elsewhere- the DMRC (Delhi Metro Rail Corporation  or the Metro) is a shining example of economic reforms. It has mitigated the misery of the commuters at a lower price than the oppressive and abusive bus service in Delhi. It has brought about net additions to quality employment, increased incomes in the areas served by it and improved residential colonies. It has become a model of quality, efficiency, productivity, growth and transparency. What are economic reforms meant for if not this? Economic reforms mean reduction in hardship to the people, but for the FDI people have been asked to accept hardship in the interest of development- logic that  neither sells nor cuts ice. What kind of economic thinking is afflicting the government? It is not capitalism, it was never meant to be communism- it is confused thinking or motivated priorities for vested interests.

There are several critical areas where foreign capital can prove to be mutually beneficial. Government is privy to that information and can always invite public participation to enlarge or update the list. Meantime, government should launch  reforms immediately to make the PDS(Public Distribution System) healthy. My first agitation as a  student activist  in the 1960 was against the corruption in the PDS/Fair price shops, which were indulging in black marketing of sugar. Those were hard times, but even at that time corruption was able to over ride transparency in governance. Corruption was not only rampant, it was open. This was the time when the country was under the rule of one monolith party both at the centre and the states and JawarLal Nehru was the Prime Minister of India. Things have only worsened since then, not improved, as many more items have been added to be sold through the Fair Price shops in the country. If the Prime Minister is really honest about ushering in economic reforms, the PDS needs to be immediately put under the Economist surgeon’s knife.

The fate of the Mahatma Gandhi Rural Employment Guarantee Scheme or the MNREGA is another instance of continuing corruption under government’s supervision. Even the Minister for Rural Development has openly accepted it. It is mass robbery of state funds. The distortions such schemes have introduced in the plan implementation have seriously dented government efforts at development and put the life of honest public servant to risk. Many have suffered, either burnt alive or killed or tortured. The government’s only response was to pass a whistle blower’s legislation. But can it solve the draconian problem of corruption in the country? Such halfhearted steps don’t substitute good governance. When this government can do nothing to rein corruption, rhetoric alone will not be able to do anything. Same is the case with FDI in multi-brand retail. All the hoopla of the government on the subject is nothing more than a hoax, humbug and dissembling only.

The day when an entrepreneur will be able to start his business without any hassles for various approvals from the government will be the day of genuine economic reforms. The day the farmer will be able to get quality credit the same day will be the real day of economic reforms. The day students would be able to get education loans to finance their studies at no interest, so that human resources development for nation building is accelerated, will be the day of economic reforms. The FDI in retail trade will cause more misery for the common man, as the cost of living is bound to increase in the vicinity of the operational area of the store. The economics of transfer of costs of urbanization to the poor needs to be studied for playing fair with people.The burden of subsidizing urbanization borne by the poor needs to be studied. When a Bangalore grows, the existing population shares the cost of urbanization by way of reduction in its purchasing power. When incomes are stagnant and costs keep on rising continuously, a situation of economic oppression comes into operation. Beyond tolerable limit, it results in the crime graph rising. Can it be termed sustainable development?

Unless the government reviews its decision to allow FDI in multi brand retail, it is entering an unnecessary conflict zone. It is creating unhealthy economic conditions for the people. It will witness repeated agitations against this decision. Even the results of the next elections might be affected by it. FDI in retail can therefore wait for some more time.

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